Many investors arrive at retirement with substantial assets accumulated over years of disciplined saving and prudent investing. Often, these investors are concerned about how best to use their assets to meet monthly retirement expenses, while at the same time preserving their assets for heirs, philanthropy, or other purposes. Traditionally, these investors have had three basic options for generating retirement income:
1. A “planned withdrawal program,” in which an investor gradually spends a limited portion of assets over a set period, with the remaining assets invested for long-term retirement goals.
2. A “guaranteed income option,” in which an investor turns over assets to an insurance company and purchases a fixed immediate annuity that provides guaranteed income for life.
3. A “spend only the income strategy,” in which an investor spends only the dividend and interest income generated by his or her retirement portfolio, leaving the principal intact.